Back3 blue chip stocks to BUY as recommended by Sharekhan
Sharekhan, a brokerage company, has placed a buy call on the shares of Dabur India, Bosch Ltd., and HCL Technologies.
PremiumSharekhan, a brokerage company, has placed a buy call on the shares of Dabur India, Bosch Ltd., and HCL Technologies. As Sharekhan has set a target price of Rs. 1,140 for HCL, Rs. 19,135 for Bosch, and Rs. 645 for Dabur India, these blue chip stocks indicate a strong potential upside.
HCL Technologies
Sharekhan has said in a note that “HCL Tech delivered in-line revenue growth with steady progression of clients across higher size buckets and healthy deal wins, while EBIT margin remained below expectations owing to supplyside pressures, delay in hike in realizations and rising travel expenses. Headline constant currency (CC) revenue growth of 2.7%/15.6% q-o-q/y-o-y was in line with our estimates. HCL Tech’s services business (IT business + ERD) revenue growth was moderated to 2.3% q-o-q in Q1FY2023 after reporting more than 5% q-o-q CC growth for last three consecutive quarters. EBIT margins declined 100 bps to 17%. The management believes that strong demand momentum would continue in the near-term because of higher enterprise spending on digital transformation, IT operating model transformation, and consulting offerings."
“HCL Tech’s strength in digital foundation and modern applications position the company to capture a reasonable share of the market opportunity. Hence, the company reiterated its 12-14% revenue growth guidance for FY2023E, in-line with our expectations and an EBIT margin of 18-20% despite reporting a 17% EBIT margin in Q1FY2023. The company is expected to achieve lower end of EBIT margin guidance given innovative pricing, optimisation of operating costs, pyramid rationalization, fresher addition and higher utilisation," said the brokerage.
“HCL Tech is expected to achieve its revenue growth guidance in FY2023E given its strength in digital foundation, unique integrated infrastructure and app services, and leadership in the fast-growing ERD segment. At the CMP, the stock trades at a reasonable valuation of 17x/16x its FY2023E/FY2024E earnings, in-line with its 5-year average valuation. Any further weakness in stock price would turn the risk-reward ratio more favorable. Further, the stock price offers dividend yield of 4.5% at current market price. We continue prefer HCL Tech, given strong capabilities in digital foundation, higher payout ratio, and healthy deal wins. Hence, we maintain Buy on the stock with a price target (PT) of Rs. 1,140," Sharekhan has claimed.
Bosch Ltd
The brokerage has said that “Bosch Limited (Bosch) continues to lay emphasis on future technologies, including electrification in the automotive segment, foraying into new markets and expanding its retail network, as per its FY22 annual report Management is cautiously positive and expects growth across segments, with the e-mobility business driving overall growth. Further, the management expects 30% EV penetration in India by 2030. The capex for FY23E is estimated to be Rs. 550-600 crore, largely focused on R&D for new businesses. Further, the company plans to invest more than Rs. 200 crore in India in the next five years in advanced automotive technologies and the digital mobility space. We expect Bosch to continue to see an increase in content per vehicle with the advent of BS-VI emission norms as vehicles require significant changes in combustion, powertrain systems, and exhaust gas treatment."
“Content per vehicle would be driven by improvement in safety features and conveniences with the advent of electric vehicles and increasing awareness among the customers. Supply of fuel injection systems to two-wheeler players would be an incremental growth opportunity. Expansion of the power tool business’ distribution network in Tier-3 and Tier-4 cities, export of BS-VI automotive components to neighbouring countries and greater adoption of connected and electric vehicles would be key growth drivers for the company. Bosch has a strong technological parentage and operates in a high-entry barrier industry with a strong balance sheet, zero debt, and healthy returns ratios. Bosch is well-prepared to tap on emerging opportunities in electrification and connected vehicles with strong technological support from its parent, Robert Bosch GmbH," said Sharekhan.
Sharekhan has further stated that “Bosch’s management is cautiously positive about the demand scenario, expecting it on the path to recovery. We expect the company to be a key beneficiary of the revival in automotive demand, driven by pent-up offtake and normalisation of economic activities. Bosch is a strong technological company with a robust balance sheet, zero debt, and healthy return ratios. The company’s strong brand positioning, focus on technology, and electrification of vehicles will enable its high growth visibility. The company’s order book of Rs. 18,500 crore for BS-VI grade products is likely to be executed in the next 5-6 years, which provides healthy growth visibility. We expect Bosch’s earnings to report a 26.4% CAGR during FY22-FY24E, driven by a 20% revenue CAGR and a 240-bps rise in EBITDA margin expansion to 14.8% in FY24E from 12.4% in FY22. Thus, we retain Buy with a revised PT of Rs. 19,135, factoring recovery in automotive demand across segments, access to robust e-mobility technology, and improving content per vehicle. The stock trades below its historical average at P/E of 24.8x and EV/EBITDA of 16.8x its FY24E estimates."
Dabur India
Sharekhan has said in its research report that “Dabur India Limited (Dabur) highlighted achieving mid-single digit volume growth in its domestic business in Q1FY2023 (versus 34% volume growth in Q1FY2022), driven by strong double-digit growth in its foods and beverage business. This is better compared to some of the other FMCG peers who are likely to post flat or low single-digit decline in sales volume. The foods and beverage business has gained momentum in the past two quarters due to receding scare of the pandemic and is likely to maintain it in the medium term, supported by a slew of new launches. This along with better monsoon (7% above normal monsoon as of now) will help volume growth momentum to improve in the quarters ahead (especially in Q3 and Q4). Margins would remain under pressure in the near term. However, expected softening in commodity prices will help margins to improve in H2FY2023."
“The diversified portfolio of brands, sustained market share gains in key categories, good traction to new launches, and distribution expansion would help Dabur achieve double-digit revenue and earnings growth in the medium term (with stable OPM). We expect Dabur’s revenue and PAT to grow by 15% and 19% over FY2022-FY2024, respectively. The stock has underperformed compared to broader indices and is currently trading at 45x/37x its FY2023E/FY2024E earnings, which is at a stark discount to its last five years’ average multiple of 47x. We maintain our Buy recommendation on the stock with a revised price target (PT) of Rs. 645," claimed the broking firm Sharekhan.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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